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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- ---------------------------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
OCTOBER 31, 1998 0-15264
MANATRON, INC.
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 38-1983228
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2970 SOUTH 9TH STREET
KALAMAZOO, MICHIGAN 49009
(Address of Principal Executive Offices) (Zip Code)
(616) 375-5300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes __X__.
No _____.
The number of shares outstanding of registrant's common stock, no
par value, at December 11, 1998, was 2,939,136 shares.
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<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
OCTOBER 31, APRIL 30,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and equivalents $ 988,771 $ 1,613,669
Receivables, net 6,730,760 5,909,623
Revenues earned in excess of billings and
retainages on long-term contracts 3,075,245 2,723,571
Inventories 388,908 296,420
Other current assets 618,697 676,255
----------- -----------
Total current assets 11,802,381 11,219,538
----------- -----------
NET PROPERTY AND EQUIPMENT 1,132,229 1,310,096
----------- -----------
OTHER ASSETS:
Long-term receivables, less current portion 568,163 567,222
Officers' receivable 335,437 343,724
Computer software development costs, net 1,701,014 1,461,437
Goodwill, net 807,918 900,334
Other, net 170,770 60,725
----------- -----------
Total other assets 3,583,302 3,333,442
----------- -----------
$16,517,912 $15,863,076
=========== ===========
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<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 155,000 $ 100,000
Accounts payable 1,647,526 1,099,365
Billings in excess of revenues earned on
long-term contracts 1,469,673 1,343,490
Billings for future services 3,879,372 4,747,231
Accrued liabilities 3,317,327 3,052,561
----------- -----------
Total current liabilities 10,468,898 10,342,647
----------- -----------
DEFERRED INCOME TAXES 124,000 124,000
----------- -----------
LONG-TERM DEBT 100,000 125,000
----------- -----------
OTHER LONG-TERM LIABILITIES 45,678 160,814
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock 5,584,799 5,275,130
Retained earnings 641,089 163,797
Deferred compensation (271,552) (103,312)
Unearned ESOP shares (175,000) (225,000)
----------- -----------
Total shareholders' equity 5,779,336 5,110,615
----------- -----------
Total liabilities and shareholders' equity $16,517,912 $15,863,076
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------------- ---------------------------
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $9,220,221 $5,917,284 $17,303,277 $11,881,269
COST OF REVENUES 6,235,892 3,726,684 11,488,856 7,549,234
---------- ---------- ----------- -----------
Gross profit 2,984,329 2,190,600 5,814,421 4,332,035
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,705,192 2,116,598 5,332,545 4,201,558
---------- ---------- ----------- -----------
Income from operations 279,137 74,002 481,876 130,477
OTHER EXPENSE, net (4,935) (25,714) (4,586) (61,598)
---------- ---------- ----------- -----------
Income before provision
for federal income taxes 274,202 48,288 477,290 68,879
PROVISION FOR FEDERAL
INCOME TAXES (Note 2) -- -- -- --
---------- ---------- ----------- -----------
NET INCOME $ 274,202 $ 48,288 $ 477,290 $ 68,879
========== ========== =========== ===========
BASIC EARNINGS PER SHARE $ .09 $ .02 $ .17 $ .02
========== ========== =========== ===========
DILUTED EARNINGS PER SHARE $ .09 $ .02 $ .15 $ .02
========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
-------------------------------
1998 1997
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 477,290 $ 68,879
Adjustments to reconcile net income to net cash
and equivalents provided by operating activities:
Depreciation and amortization expense 1,023,523 758,632
Deferred compensation expense 89,399 37,481
Decrease (increase) in current assets:
Receivables, net (821,137) 691,069
Revenues earned in excess of billings and
retainages on long-term contracts (351,674) (499,861)
Inventories (92,488) 185,112
Other current assets 57,558 76,830
Increase (decrease) in current liabilities:
Accounts payable and accrued liabilities 812,927 (418,610)
Billings in excess of revenues earned on
long-term contracts 126,183 (257,675)
Billings for future services (867,859) (544,579)
----------- ---------
Net cash and equivalents provided by
operating activities 453,722 97,278
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in long-term receivables 7,346 239,897
Other, net (142,146) 829
Investments in computer software (638,793) (226,509)
Net additions to property and equipment (321,923) (245,052)
----------- ---------
Net cash and equivalents used for investing
activities (1,095,516) (230,835)
----------- ---------
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance (repurchase) of common stock 102,032 (190,137)
Purchase of common stock for ESOP -- 50,000
Increase in long-term debt 30,000 157,000
Decrease in long-term liabilities (115,136) (105,243)
----------- ---------
Net cash and equivalents provided by (used
for) financing activities 16,896 (88,380)
----------- ---------
CASH AND EQUIVALENTS:
Decrease (624,898) (221,937)
Balance at beginning of period 1,613,669 457,691
----------- ---------
Balance at end of period $ 988,771 $ 235,754
=========== =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
(1) GENERAL INFORMATION
The consolidated condensed financial statements included herein have
been prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although the Registrant believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that
these consolidated condensed financial statements be read in
conjunction with the consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for
the year ended April 30, 1998, as filed with the Securities and
Exchange Commission on July 29, 1998. There have been no significant
changes in such information since the date of such Form 10-K.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
only a normal and recurring nature, necessary to present fairly
(a) the financial position of the Registrant as of October 31, 1998,
and April 30, 1998, and (b) the results of its operations for the six-
months ended October 31, 1998 and 1997, and (c) cash flows for the
six-months ended October 31, 1998 and 1997.
(2) FEDERAL INCOME TAXES
As of April 30, 1997 and 1996, the Company recorded valuation
allowances totaling $912,000 and $834,000, respectively, against
certain of its future tax benefits, including its tax loss
carryforwards, due to the uncertainty of their ultimate realization.
Approximately $166,000 of this valuation allowance was utilized in
fiscal 1998 to offset the provision for federal income taxes.
As of April 30, 1998, the Company had tax loss carryforwards of
approximately $211,000 and a valuation allowance of approximately
$746,000 remaining which will be utilized to offset any provision for
federal income taxes in fiscal 1999. As a result, the Company has not
recorded a provision for income taxes for the six months ended
October 31, 1998. The tax loss carryforwards are available to offset
future taxable income through the year 2011.
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(3) COMPREHENSIVE INCOME
In July 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards
for reporting and display of comprehensive income and its components
in a full set of financial statements. The objective of SFAS 130 is
to report a measure of all changes in equity of an enterprise that
result from transactions and other economic events of the period other
than transactions with owners. Comprehensive income is the total of
net income and all other non-owner changes in equity. The Company
adopted this standard effective May 1, 1998. Total comprehensive
income was the same as net income for the three and six month periods
ended October 31, 1998 and 1997, respectively.
(4) EARNINGS PER SHARE
The following table reconciles the numerators and denominators used
in the calculation of basic and diluted earnings per share for each
of the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------------- ------------------------------
1998 1997 1998 1997
-------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Numerators:
Net income $ 274,202 $ 48,288 $ 477,290 $ 68,879
============== ============ ============= ==============
Denominators:
Denominator for basic earnings
per share, average outstanding
common shares 2,931,096 2,808,245 2,891,477 2,829,848
Potential dilutive shares resulting 255,963 72,051 270,204 63,278
-------------- ------------ ------------- --------------
Denominator for diluted earnings
per share 3,187,059 2,880,296 3,161,681 2,893,126
============== ============ ============= ==============
Earnings Per Share:
Basic $ 0.09 $ 0.02 $ 0.17 $ 0.02
============== ============ ============= ==============
Diluted $ 0.09 $ 0.02 $ 0.15 $ 0.02
============== ============ ============= ==============
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net revenues of $9,220,221 for the three months ended October 31, 1998,
have increased by 56% in comparison to the $5,917,284 of net revenues that
were reported for the comparable period in the prior fiscal year. Year to
date net revenues of $17,303,277 also have increased by 46% in comparison
to the $11,881,269 of net revenues that were reported for the six months
ended October 31, 1997. These amounts include revenues from computer
hardware and software shipments, sales of computer forms and supplies, and
various related services such as mass real estate appraisals
(revaluations), software support, training, hardware maintenance, and forms
processing and printing.
Service revenues have increased by 44% in the current quarter and 42% on a
year-to-date basis over the comparable prior year amounts primarily because
of the new revaluation contracts totaling approximately $30.0 million that
were signed with Allegheny County (Pittsburgh), Pennsylvania, and Hamilton
County (Cincinnati), Ohio, during fiscal 1998. As of October 31, 1998,
approximately $6.0 million of fees have been recognized as revenue on these
two projects. In addition, as previously reported, the Company signed a
new contract with Dauphin County (Harrisburg), Pennsylvania, in June of
1998 which includes approximately $3.6 million of revaluation services.
However, less than $100,000 of fees have been recognized on this project
as it is just getting started. As of October 31, 1998, the Company's backlog
for appraisal services was approximately $29.9 million which is slightly lower
than the $31.8 million reported at April 30, 1998.
Revenues from hardware, software, and supply sales have increased by 99% in
the current quarter and 58% on a year-to-date basis over the comparable
prior year amounts primarily because of additional upgrades by existing and
new customers in the midwest. Many of the orders are a result of year 2000
upgrades. In addition, the Company completed a special project for the Ohio
Office of Criminal Justice Services to provide hardware and software for
electronic reporting of criminal dispositions in 50 of its sites in Ohio.
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<PAGE>
As a result of the increase in net revenues, cost of revenues for the three
months ended October 31, 1998, also increased 67% to $6,235,892 versus the
comparable prior year amount of $3,726,684. In addition, year to date cost
of revenues of $11,488,856 have increased by 52% in comparison to the
$7,549,234 of costs that were reported for the six months ended October 31,
1997. Margins have decreased from 37% in the prior year quarter to 32% in
the current quarter and from 36% to 34% on a year-to-date basis because of
the increase in service and hardware revenues, which typically generate
a lower margin than software sales.
Selling, general, and administrative expenses have increased by 28% and 27%
to $2,705,192 for the three months and $5,332,545 for the six months ended
October 31, 1998, compared to $2,116,598 and $4,201,558 for the same
periods in the prior fiscal year. These increases primarily are due to
annual salary adjustments and other increased costs associated with the
ongoing development and rollout of the Company's new software products,
including Year 2000 compliance work.
As a result of the factors noted above, the Company reported a 277%
increase in its operating income for the three months and a 269% increase
for the six months ended October 31, 1998, versus the comparable periods in
the prior year. Operating income for the current quarter was $279,137
compared to $74,002 while the year-to-date amounts were $481,876 and
$130,477, respectively. In addition, interest expense, which is included
in other expense, has decreased from $86,866 to $30,037 because the Company
has reduced its average outstanding indebtedness in the last 12 months.
The Company's provision for federal income taxes generally fluctuates with
the level of pretax income. In addition, the effective tax rate is
generally impacted because of non-deductible goodwill amortization related
to the Company's acquisitions of ATEK Information Services and Specialized
Data Systems. However, as described in Note 2, the Company has not
recorded a provision for federal income taxes for the three or six months
ended October 31, 1998, because certain unrecorded future tax benefits,
including the Company's tax loss carryforwards, will be utilized to offset
it.
As a result of the factors noted above, the Company reported net income of
$274,202 or $.09 per share for the three months and $477,290 or $.17 per
share for the six months ended October 31, 1998, versus $48,288 or $.02 per
share and $68,879 or $.02 per share for the comparable periods in the prior
fiscal year. This equates to an improvement over the prior year of 468%
and 593%, respectively.
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<PAGE>
YEAR 2000 READINESS DISCLOSURE
This Year 2000 Readiness Disclosure is based upon and partially repeats
information provided by the Company's outside consultants and others
regarding the Year 2000 readiness of the Company and its customers,
suppliers, financial institutions, and other parties. Although the Company
believes this information to be accurate, it has not independently verified
such information.
The Company is currently in the process of addressing a potential problem
that is facing all users of automated information systems. The problem is
that many computer systems and applications process dates using only two
digits (rather than four) for the year. These systems may recognize a date
using "00" as the year 1900 rather than the year 2000. The problem could
affect a wide variety of automated information systems such as mainframe
applications, personal computers, and communication systems, in the form of
software failure, errors, or miscalculations. By nature, the software
industry is highly dependent upon computer systems. The year 2000 issue is
especially important to software vendors because most applications have
date dependencies as an integral part of their logic.
The Company has developed and is implementing plans to prepare itself and
its customers for the year 2000. The Company's plan is regularly updated
and monitored by technical personnel and is reviewed by management of the
Company on a periodic basis. Specifically, the plan addresses the
Company's internal data processing systems, its software products, its
third party products, and communications with its customers as follows:
INTERNAL DATA PROCESSING
The Company's internal data processing systems include hardware and
software that facilitates its business operations. The internal systems
include:
- - customer information systems
- - accounting, human resource, and payroll systems
- - customer support systems
The Company's Technical Services department has spearheaded the effort to
manage these systems through a smooth year 2000 conversion. Currently, the
Company's internal hardware and operating systems have been inventoried and
are substantially year 2000 compliant. The internal software systems are
in varying degrees of compliance with the target being to have them all
compliant by mid-1999. The Company is currently implementing a new, year
2000-compliant, corporate-wide "customer care" software product to replace
its customer information and support systems. The Company recently has
embarked on a project to replace its internal financial software with a
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new, more cable system which is year 2000 compliant. The Company believes
that its internal systems will be able to effectively support its
operations through the year 2000 and beyond.
THE COMPANY'S SOFTWARE PRODUCTS
A core strategy of the Company is to develop and market turnkey software
systems for local government. Most of these products have some dependency
on dates. As such, the Company has been working to update them to properly
handle years after 1999. Of the Company's 86 major products, only 60 are
targeted for compliance. The others are either being discontinued or
replaced by more modern products. As of September 30, 1998, this effort is
estimated to be over 80% complete. For comparison, as of January 31, 1998,
this effort was estimated to be only about 13% complete, and as of July 31,
1998 about 60% complete. The Company believes that it has significant
momentum to complete the necessary programming to render its products year
2000 compliant. As of September 30, 1998, the breakdown is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
- - Products that are compliant 53%
- - Products in QA Phase 34%
- - Products in Programming Phase 6%
- - Products with analysis completed 9%
- - Products not yet started 9%
</TABLE>
The Company expects this effort to be primarily complete by the end of
1998. Some work will remain for early 1999, but it is expected to be
limited. The Company expects to use 1999 to focus on its customers and
ensuring that their systems are upgraded and functional prior to January 1,
2000.
THIRD PARTY HARDWARE AND SOFTWARE
The Company's software products run on industry standard hardware and
operating systems. To facilitate the deployment of its software, the
Company acts as a value-added reseller for a wide variety of hardware
manufacturers, installing and supporting both the hardware and software for
its customers. The Company's technical services department is spearheading
the effort to document the year 2000 compliance status of third party
hardware and software and to identify those products that need to be
upgraded or replaced. This identification effort is also substantially
complete; however, this information changes as vendors release more
information about and options for managing the year 2000 issue.
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<PAGE>
Significant third parties with which the Company interfaces with regard to
the year 2000 problem include those identified above and other customers,
technology vendors and service providers, financial institutions, and
companies that provide utility infrastructure (power, delivery services,
telecommunications). Unreadiness by these third parties would expose the
Company to the potential for loss and impairment of business processes and
activities. The Company is assessing these risks and is considering the
need for contingency plans intended to address perceived risks. The
Company cannot predict what effect the failure of such a third party to
address, in a timely manner, the year 2000 problem would have on the
Company.
COMMUNICATION WITH CUSTOMERS
Another important aspect of the Company's year 2000 strategy is to
coordinate its efforts with those of its customers. Communication of the
Company's strategy to its customers also has been substantially completed.
The communication includes the compliance plans for specific software
products and the year 2000 services offered by the Company. This
communication will continue throughout 1999 as the Company works with its
customer base to upgrade or replace those software and hardware systems.
To support this effort, the Company has launched a year 2000 area on its
web site to make relevant information available to both Company personnel
and customers.
The Company will continue to assess the impact of, and work on, the year
2000 issues throughout fiscal 1999. The Company's goal is to perform tests
of its systems and applications during 1998 and 1999 and to have all
targeted systems and applications compliant with the century change by June
1999, which would allow the Company to have time to address any last minute
issues.
The Company has spent between approximately $350,000 to $550,000 in
connection with year 2000 issues to date and expects that it will spend
approximately $150,000 to $250,000 during 1999. The costs to implement the
year 2000 changes primarily consist of personnel expense for staff
dedicated to identifying, assessing, remediating, and testing year 2000
issues and professional fees paid to third party providers of remedial
services. It is the Company's policy to expense such costs as incurred.
The Company also may invest in new or upgraded technology which has
definable value lasting beyond 2000. In these instances, where year 2000
compliance is merely ancillary, the Company may capitalize and depreciate
such an asset over its estimated useful life.
Based on currently available information, management does not presently
anticipate that the costs to address the Year 2000 issues will have a
material adverse impact on the Company's financial conditions, results of
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operations, or liquidity. However, the extent to which the computer
operations and other systems of the Company's important third parties are
adversely affected could, in turn, affect the Company's ability to
communicate with such third parties and could materially affect the
Company's results of operations in any period or periods. The costs have
had a negative effect on the Company's earnings and the future costs
associated with the year 2000 issue are expected to have a similar effect.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best
estimates. There can be no guarantee that these estimates will be achieved
and actual results could differ from those anticipated. Specific factors
that might cause differences include, but are not limited to, the ability
of other companies on which the Company's systems rely to modify or convert
their systems to be year 2000 compliant, the ability of all third parties
who have business relationships with the Company to continue their
businesses without interruption, the ability to locate and correct all
relevant computer codes, and similar uncertainties. As a result, the
Company is in the process of evaluating possible internal and external
scenarios that might have an adverse effect on the Company, as well as the
need for contingency plans to address these scenarios.
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $1,333,483 at October 31, 1998, has increased by 52%
compared to the April 30, 1998, amount of $876,891. These levels reflect
current ratios of 1.13 and 1.08, respectively. The increase in working
capital primarily is due to the increase in receivables which are a result
of the higher amount of revenues that the Company is reporting versus the
prior year.
Shareholders' equity at October 31, 1998, increased by $668,721 to
$5,779,336 from the balance reported at April 30, 1998, because of $102,032
of employee stock purchases, $477,290 of net income, and $89,399 of
deferred compensation expense that occurred during the first six months.
As a result, book value per share has increased to $1.97 as of October 31,
1998, from $1.80 at April 30, 1998.
The nature of the Company's business is not property or equipment
intensive. Net capital expenditures, which were approximately $322,000 for
the six months ended October 31, 1998, are approximately 31% higher than
the $245,000 of capital expenditures reported for the comparable period in
the prior fiscal year. The net capital expenditures relate primarily to
the purchase of additional or new computer hardware and software for the
Company's technical and support personnel.
As the Company's revenues are generated from contracts with local
governmental entities, it is not uncommon for certain of its accounts
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<PAGE>
receivable to remain outstanding for approximately three to four months,
thereby having a negative impact upon cash flow. On October 9, 1998, the
Company entered into a new loan agreement with Comerica Bank which replaces
its Revolving Credit Agreement dated as of November 11, 1994. This new
agreement provides a $3.0 million line of credit to the Company at prime
through November 1, 2000. As of October 31, 1998, no borrowings were
outstanding under this line of credit. In addition, as of October 31,
1998, the Company owed $80,000 on acquisition-related debt and $175,000 on
its ESOP loan. The Company anticipates that the revolving line of credit,
together with existing cash balances, and cash generated from future
operations will be sufficient for the Company to meet its working
capital requirements for at least the next 12 months.
The Company cannot precisely determine the effect of inflation on its
business. The Company continues, however, to experience relatively stable
costs for its inventory as the computer hardware market is very
competitive. Inflationary price increases related to labor and overhead
will have a negative effect on the Company's cash flow and net income to
the extent that they cannot be offset through improved productivity and
price increases.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Certain information contained in this Form 10-Q may constitute or include
forward-looking statements. Such forward-looking information involves
important known and unknown risks and uncertainties and other factors that
may cause the actual results, performance, or achievements of the Company
to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements.
These risks and uncertainties include, but are not limited to,
uncertainties relating to economic conditions; possible future acquisitions
and divestitures; technological changes and developments in the competitive
environment in which the Company operates; the effect of the year 2000 on
the Company's business; spending patterns of the Company's customers;
success of the Company in negotiations with its lenders; size, timing, and
recognition of revenue from significant orders; ability of the Company to
successfully implement its business strategy of developing and licensing
client/server decision support applications software designed to address
specific industry markets; new product introductions and announcements by
the Company's competitors; changes in Company strategy; product life
cycles, cost and continued availability of third party software and
technology incorporated into the Company's products; cancellations of
maintenance and support agreements; potential obsolescence of the Company's
existing products or services; pricing and availability of equipment,
materials, inventories, and programming; success in and expense associated
with the development, production, testing, marketing, and shipping of
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<PAGE>
products, including a failure to ship new products and technologies when
anticipated, failure of customers to accept these products and technologies
when planned, and any defects in products; perceived absolute or relative
overall value of the Company's products by the Company's customers,
including features, quality, and pricing compared to other competitive
products; amount, and rate of growth in, the Company's selling, general,
and administrative expenses; occurrence of any expenditures and expenses,
including depreciation and research and development expenses; costs and
other effects of legal and administrative cases and proceedings (whether
civil or criminal), settlements, and investigators, claims, and changes in
those items; developments or assertions by or against the Company relating
to intellectual property rights; adoption of new, or changes in, accounting
policies and practices and the application of such policies and practices;
and effects or changes within the Company's organization or in compensation
and benefit plans. Since the purchase of the Company's products is
relatively discretionary and generally involves a significant commitment of
capital, in the event of any downturn in any potential customer's business
or the economy in general, purchases of the Company's products may be
deferred or canceled. Further, the Company's expense levels are based, in
part, on its expectations as to future revenue and a significant portion of
the Company's expenses do not vary with revenue. As a result, if revenue
is below expectations, results of operations are likely to be materially
adversely affected. Shareholders are cautioned not to place undue reliance
on the forward-looking statements made in this Form 10-Q, which speak only
as of the date hereof.
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<PAGE>
PART II. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of shareholders of the Company was held on October 8,
1998. The purpose of the meeting was to elect directors, approve the
Restricted Stock Plan of 1998, approve the Employee Stock Purchase Plan of
1998, and transact any other business that properly came before the
meeting.
The name of each director elected (along with the number of votes cast for
or authority withheld) is as follows:
<TABLE>
<CAPTION>
VOTES CAST
AUTHORITY
ELECTED DIRECTORS FOR WITHHELD/AGAINST
- ----------------- --- ----------------
<S> <C> <C>
Gene Bledsoe 2,644,926 6,174
Jane M. Rix 2,640,433 10,667
Allen F. Peat 2,631,277 19,823
Harry C. Vorys 2,645,248 5,852
</TABLE>
The following persons continue to serve as directors: Richard J. Holloman,
Douglas A. Peat, Randall L. Peat, Paul R. Sylvester, and Stephen C.
Waterbury.
The number of votes cast for the Restricted Stock Plan of 1998 and the
Employee Stock Purchase Plan of 1998 is as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
Restricted Stock Plan of 1998 1,850,427 96,996 703,677
Employee Stock Purchase Plan of 1998 1,930,139 19,836 701,125
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following documents are filed as exhibits to this
report on Form 10-Q:
-17-
<PAGE>
3.1 Restated Articles of Incorporation. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
3.2 Bylaws. Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Revolving Credit Loan Agreement. Previously filed as an
exhibit to the Company's Form 8-K Current Report dated
November 11, 1994, and incorporated herein by reference.
4.4 First Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.5 Second Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.6 Rights Agreement dated June 2, 1997 between Manatron, Inc.
and Registrar and Transfer Company. Previously filed as an
exhibit to the Company's Form 8-A filed on June 11, 1997,
and incorporated herein by reference.
10.1 Manatron, Inc. 1989 Stock Option Plan.<F*> Previously filed
as an exhibit to the Company's Form 10-K Annual Report for
the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.2 Manatron, Inc. 1995 Long-Term Incentive Plan.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.3 Executive Employment Agreement with Randall L. Peat.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
-18-
<PAGE>
10.4 Manatron, Inc. Employee Stock Ownership and Salary Deferral
Plan.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.5 ATEK Information Services, Inc. Stock Purchase Agreement.
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.6 Stock Purchase Agreement between Ronald D. Stoynoff and
Allen F. Peat dated March 15, 1994. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.7 Agreement between Manatron, Inc. and Ronald D. Stoynoff
effective as of April 1, 1994. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.8 Asset Purchase Agreement between Manatron, Inc. and Moore
Business Forms, Inc. dated November 11, 1994. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.9 Manatron, Inc. 1994 Long-Term Incentive Plan.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.10 Agreement between Manatron, Inc. and Allen F. Peat dated
October 17, 1995.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.11 Employment Agreement with Douglas A. Peat dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.12 Employment Agreement with Jane M. Rix dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
-19-
<PAGE>
10.13 Employment Agreement with James W. Sanderbeck dated October
10, 1996.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.14 Employment Agreement with Paul R. Sylvester dated October
10, 1996.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.15 Employment Agreement with Larry L. Terhune dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.16 Manatron, Inc. Executive Incentive Plan for 1999.<F*>
10.17 Form of Indemnity Agreement.<F*> Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.18 Indemnity Agreement of Daniel P. Muthard.<F*> Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.19 Property Revaluation Articles of Agreement for Allegheny
County, Pennsylvania dated May 20, 1998. Previously filed
as an exhibit to the Company's Form 10-Q Quarterly Report
for the period ended July 31, 1998, and here incorporated by
reference.
10.20 Restricted Stock Plan of 1998.<F*> Previously filed as an
exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting of Shareholders held October 8, 1998, and
here incorporated by reference.
10.21 Employee Stock Purchase Plan of 1998.<F*> Previously filed
as an exhibit to the Company's Definitive Proxy Statement
for its Annual Meeting of Shareholders held October 8, 1998,
and here incorporated by reference.
27 Financial Data Schedule.
- -----------------------
<F*>Management contract or compensatory plan or arrangement.
-20-
<PAGE>
(b) No reports on Form 8-K were filed during the three months ended
October 31, 1998.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: December 15, 1998 By /S/ PAUL R. SYLVESTER
Paul R. Sylvester
President, Chief Executive
Officer, and Treasurer
(Principal Executive Officer)
Date: December 15, 1998 By /S/ JOSEPH ZALEWSKI
Joseph Zalewski
Vice President-Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-22-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
- ------ --------
3.1 Restated Articles of Incorporation. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
3.2 Bylaws. Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Revolving Credit Loan Agreement. Previously filed as an
exhibit to the Company's Form 8-K Current Report dated
November 11, 1994, and incorporated herein by reference.
4.4 First Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.5 Second Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.6 Rights Agreement dated June 2, 1997 between Manatron, Inc.
and Registrar and Transfer Company. Previously filed as an
exhibit to the Company's Form 8-A filed on June 11, 1997,
and incorporated herein by reference.
10.1 Manatron, Inc. 1989 Stock Option Plan.<F*> Previously filed
as an exhibit to the Company's Form 10-K Annual Report for
the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.2 Manatron, Inc. 1995 Long-Term Incentive Plan.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
-i-
<PAGE>
10.3 Executive Employment Agreement with Randall L. Peat.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.4 Manatron, Inc. Employee Stock Ownership and Salary Deferral
Plan.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.5 ATEK Information Services, Inc. Stock Purchase Agreement.
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.6 Stock Purchase Agreement between Ronald D. Stoynoff and
Allen F. Peat dated March 15, 1994. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.7 Agreement between Manatron, Inc. and Ronald D. Stoynoff
effective as of April 1, 1994. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.8 Asset Purchase Agreement between Manatron, Inc. and Moore
Business Forms, Inc. dated November 11, 1994. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.9 Manatron, Inc. 1994 Long-Term Incentive Plan.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.10 Agreement between Manatron, Inc. and Allen F. Peat dated
October 17, 1995.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.11 Employment Agreement with Douglas A. Peat dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
-ii-
<PAGE>
10.12 Employment Agreement with Jane M. Rix dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.13 Employment Agreement with James W. Sanderbeck dated October
10, 1996.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.14 Employment Agreement with Paul R. Sylvester dated October
10, 1996.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.15 Employment Agreement with Larry L. Terhune dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.16 Manatron, Inc. Executive Incentive Plan for 1999.<F*>
10.17 Form of Indemnity Agreement.<F*> Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.18 Indemnity Agreement of Daniel P. Muthard.<F*> Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.19 Property Revaluation Articles of Agreement for Allegheny
County, Pennsylvania dated May 20, 1998. Previously filed
as an exhibit to the Company's Form 10-Q Quarterly Report
for the period ended July 31, 1998, and here incorporated by
reference.
10.20 Restricted Stock Plan of 1998.<F*> Previously filed as an
exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting of Shareholders held October 8, 1998, and
here incorporated by reference.
10.21 Employee Stock Purchase Plan of 1998.<F*> Previously filed
as an exhibit to the Company's Definitive Proxy Statement
for its Annual Meeting of Shareholders held October 8, 1998,
and here incorporated by reference.
-iii-
<PAGE>
27 Financial Data Schedule.
- -----------------------
<F*>Management contract or compensatory plan or arrangement.
-iv-
<PAGE>
EXHIBIT 10.16
MANATRON, INC.
EXECUTIVE INCENTIVE PLAN FOR FISCAL 1999
ARTICLE I
DECLARATION
SECTION 1. ESTABLISHMENT OF PLAN. The Manatron, Inc. Executive Incentive
Plan for Fiscal 1999 (the "PLAN") is established by Manatron,
Inc. (the "COMPANY") for fiscal year 1999, and may be
continued, intact or as amended, from year to year, at the
Company's option. The Plan is an annual incentive,
performance, and bonus compensation program for eligible
employees of the Company.
SECTION 2. OBJECTIVES. The objectives of the Plan are to:
(a) Reward the outstanding performance of certain Executive
Employees who contribute significantly to the achievement
of the Company's annual objectives; and
(b) Facilitate the attraction and retention of superior
personnel required for continued innovation, growth, and
profitability.
SECTION 3. EFFECTIVE DATES. The effective date of the Plan is May 1,
1998. Each provision of the Plan applies until the effective
date of an amendment of that provision.
ARTICLE II
DEFINITIONS
The following terms shall have the definition stated, unless
the context requires a different meaning:
SECTION 1. PRE-TAX EARNINGS. "Pre-Tax Earnings" shall mean the Company's
corporate net income for the subject fiscal year as shown in
the Company's annual audited financial statements for that
fiscal year after all expenses but before the provision or
credit for federal income taxes, adjusted to remove amounts
expended for payments made pursuant to this Plan.
<PAGE>
SECTION 2. AWARD. "Award" means a contingent right to receive cash
following the end of an Award Year.
SECTION 3. AWARD YEAR. "Award Year" means each fiscal year of the
Company.
SECTION 4. COMMITTEE. "Committee" means the Compensation Committee of
the Board of Directors of the Company which administers the
Plan.
SECTION 5. EXECUTIVE EMPLOYEE. "Executive Employee" means a full-time
senior employee of the Company or one of the Company's
subsidiaries determined by the Committee to have the potential
of a direct and significant impact on the performance of the
Company or to make a substantial contribution to the success
of the Company.
SECTION 6. PARTICIPANT. "Participant" means an Executive Employee
determined by the Committee to be eligible for an Award for
the Award Year.
SECTION 7. PLAN. "Plan" means the Manatron, Inc. Executive Incentive
Plan for Fiscal 1999.
ARTICLE III
PARTICIPATION
SECTION 1. DESIGNATION BY COMMITTEE. An Executive Employee shall be a
Participant in the Plan for an Award Year when designated as a
Participant for that Award Year by the Committee. Executive
Employees selected by the Committee for participation for the
Award Year shall be notified in writing and provided with a
copy of this Plan or with a written summary and explanation of
the Plan.
SECTION 2. PARTICIPATION LIMITED TO ONE YEAR. Designation as a
Participant in the Plan for an Award Year is limited to that
Award Year. Each Participant must be designated as a
Participant by the Committee for each Award Year to be
eligible to participate in the Plan for that Award Year.
-2-
<PAGE>
ARTICLE IV
ADMINISTRATION
SECTION 1. AUTHORITY OF COMMITTEE. The Plan will be administered by the
Committee and (except with respect to his own Award) the Chief
Executive Officer of the Company. If deemed by the Committee
to be necessary, the Committee will adopt rules, policies, and
forms for the administration, interpretation, and
implementation of the Plan.
SECTION 2. DETERMINATION OF AWARD AMOUNTS. The components of any Award,
as listed in Article V, shall be determined by the Chief
Executive Officer and the Committee. All decisions,
determinations, and interpretations of the Chief Executive
Officer and the Committee will be final and binding on all
Participants. No member of the Committee shall be eligible to
receive Awards pursuant to the Plan.
SECTION 3. LIMITATION ON LIABILITY. Neither the Chief Executive Officer,
any member of the Committee, nor any member of the Board of
Directors shall be liable for any act or omission in
connection with the performance of such person's duties or the
exercise of such person's discretion related to any act or
omission concerning the operation and administration of the
Plan.
ARTICLE V
AWARDS
SECTION 1. DETERMINATION OF PARTICIPANT'S AWARD POTENTIAL. Unless
modified by the Committee or the Chief Executive Officer, each
Participant's award potential shall consist of the following:
(a) PERSONAL RANGE. The Participant's maximum potential
Award pursuant to this Plan for an Award Year shall be fifty
percent (50%) of the base salary paid to the Participant
during the Award Year.
(b) COMPANY PERFORMANCE. The target financial
performance and other objectives of the Company that will be
considered in determining Awards are as follows for Fiscal
1999:
(i) PRE-TAX EARNINGS. Fifty percent (50%) of the
maximum potential Award for any Participant shall be
-3-
<PAGE>
based upon the Company's Pre-Tax Earnings for the Award
Year. No Award will consist of an amount based on the
Company's Pre-Tax Earnings unless the Pre-Tax Earnings
for the Award Year are at a minimum threshold of Five
Hundred Thousand Dollars ($500,000) for the Award Year.
Twenty-five percent (25%) of the Company's Pre-Tax
Earnings for the Award Year in excess of the minimum
threshold shall be available for Awards to Participants
pursuant to the Plan. Sixty-five percent (65%) of the
Pre-Tax Earnings component of an Award for an Award Year
will be distributed to Participants pro-rata based on
each Participant's base salary for the Award Year. The
remaining thirty-five percent (35%) of the Pre-Tax
Earnings component may be distributed to Participants
based on performance objectives, criteria, and/or ratings
for individual Participants as determined pursuant to
Section 2 of Article IV ("Discretionary Portion").
(ii) OTHER OBJECTIVES. The remaining fifty percent
(50%) of the maximum potential Award for any Participant
shall be based upon the following three variables (the
"VARIABLES"):
(a) LINE OF CREDIT AND INVESTED CASH BALANCES.
As of April 30, 1998, the Company's line of credit
balance was zero, and the amount of invested cash
was One Million Five Hundred Fifty Thousand Dollars
($1,550,000). Two and one-half percent (2 1/2%) of
any reduction in the line of credit and any increase
in the invested cash as of April 30, 1999, shall be
available for Awards to Participants pursuant to the
Plan. In the event that the Board of Directors
elects to borrow money or use the Company's cash to
purchase a building, acquire another company,
purchase the Company's common stock, or to fund any
other significant nonbudgeted item, such amounts
will be excluded when calculating any decrease or
increase in the above amounts. In no event will the
amount available for Awards to Participants under
this subsection exceed Fifty Thousand Dollars
($50,000).
(b) RECEIVABLES. As of April 30, 1998, the
Company's receivables that have been past due for
more than 90 days are as follows:
-4-
<PAGE>
<TABLE>
<CAPTION>
OVER 90 OVER 120
DAYS DAYS TOTAL
------- -------- -----
<S> <C> <C> <C> <C>
Manatron, Inc. $ 9,882 $ 527,261 $ 537,143
Specialized Data Systems, Inc. 66,261 319,402 385,663
Atek Information Services, Inc. 163,349 183,247 346,596
Sabre Systems and Services 3,413 213,393 216,806
Consolidated $242,905 $1,243,303 $1,486,208
======== ========== ==========
</TABLE>
Five percent (5%) of any reduction in the One Million
Four Hundred Eighty-six Thousand, Two Hundred Eight
Dollars ($1,486,208) consolidated total, excluding write-
offs, as of April 30, 1999, shall be available for Awards
to Participants pursuant to the Plan. In no event will
the amount available for Awards to Participants under
this subsection exceed Fifty Thousand Dollars ($50,000).
(c) SALES FORECAST. The Company's sales forecast
for its fiscal year ended April 30, 1999, is Twenty-one
Million Six Hundred Seventy Thousand Dollars
($21,670,000). In the event at least one hundred percent
(100%) of this amount is achieved, then a total of Twenty
Thousand Dollars ($20,000) shall be available for Awards
to Participants pursuant to the Plan. In the event more
than one hundred percent (100%) of this amount is
achieved, then an additional Two Thousand Dollars
($2,000) for each percentage point in excess of one
hundred percent (100%) shall be available for awards to
Participants pursuant to the Plan. In no event will the
amount available for awards to Participants under this
subsection exceed Fifty Thousand Dollars ($50,000).
The amount of a Participant's Award based on the
Variables listed above will be determined as follows:
(1) sixty-five percent (65%) of the total amount of the
Variables will be distributed to Participant's pro-rata
based on each Participant's base salary for the Award
Year; and (2) the remaining thirty-five percent (35%) of
the total amount of the Variables may be distributed to
Participants based on performance objectives, criteria,
-5-
<PAGE>
and/or ratings for individual Participants as determined
pursuant to Section 2 of Article IV ("Discretionary
Portion").
Under no circumstances shall the amount of an Award
based upon the Variables for any Award Year exceed
twenty-five percent (25%) of a Participant's annual base
salary.
ARTICLE VI
INDIVIDUAL ASSESSMENT AND ADJUSTMENT
SECTION 1. PARTICIPANT'S AWARD. The basis for Awards for any Award Year
will be achievement of financial performance targets and other
objectives as set forth in this Plan and, with respect to the
Discretionary Portion, as determined in the sole discretion of
the Chief Executive Officer and Committee. If the financial
targets and other objectives are met for the Award Year, the
Chief Executive Officer will calculate and determine the
amount of the Award for each Participant based upon the extent
to which the Company's financial performance targets and other
objectives (as determined by the Chief Executive Officer) were
achieved for the Award Year.
SECTION 2. PARTIAL AWARD. In the event an Executive Employee
participates in the Plan for only part of an Award Year, the
Award may be adjusted pro-rata based on the amount of time for
which the Executive Employee was a Participant in the Plan.
ARTICLE VII
PAYMENT OF AWARDS
Subject to Article VIII, each Award, as finally determined for
the Award Year, shall be paid to the Participant in cash as soon as
administratively feasible following final determination and approval.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
SECTION 1. RETIREMENT, DEATH, DISABILITY, OR OTHER TERMINATION. In the
event of a Participant's death, disability, normal retirement,
-6-
<PAGE>
or termination of employment (unless Section 2 of this Article
applies) during an Award Year, payment of the Award earned for
that year will be pro-rated. In the event of death, payment
shall be made to the Participant's designated beneficiary, or
if there is no designated beneficiary, payment shall be made
to the Participant's estate.
SECTION 2. FORFEITURE. In the event that a Participant is terminated for
"cause," the Participant's entitlement to any Award, including
any Award for a prior Award Year that has not been paid, shall
be forfeited and the Award shall be canceled. For purposes of
this Plan, termination shall be considered to be for "cause"
if based upon (a) Participant's conviction of a crime
involving moral turpitude or embezzlement; (b) Participant's
willful activities in competition with the Company or in aid
of its competitors; (c) Participant's willful and continued
failure to substantially perform Participant's duties with the
Company under this Plan (other than any such failure resulting
from disability), under any employment agreement with the
Company, or otherwise, after a written demand for substantial
performance is delivered to Participant that specifically
identifies the manner in which the Company believes
Participant has willfully failed to substantially perform his
or her duties, and after Participant has failed to resume
substantial performance of his or her duties on a continuous
basis within 14 calendar days of receiving such demand; or (d)
Participant willfully engaging in conduct that is demonstrably
and materially injurious to the Company, monetarily or
otherwise. For purposes of (b), (c) and (d) above, no act, or
failure to act, on Participant's part shall be deemed
"willful" unless done, or omitted to be done, by the
Participant not in good faith and without reasonable belief
that the action or omission was in the best interest of the
Company.
ARTICLE IX
GENERAL PROVISIONS
SECTION 1. NO RIGHT TO PARTICIPATE. Nothing in this Plan will be deemed
to give a Participant or a Participant's legal representative
or any other person or entity claiming under or through a
Participant a contract or right to participate in the benefits
of the Plan. The selection of an individual as an Executive
Employee and as a Participant, as well as determination of the
amount of any Award or any other determination relating to the
Plan, shall be final and binding on all parties to this Plan.
-7-
<PAGE>
SECTION 2. NO EMPLOYMENT RIGHT. Participation in this Plan shall not be
construed as constituting a commitment, guarantee, agreement,
or understanding of any kind that the Company will continue to
employ any Executive Employee or Participant, and this Plan
shall not be construed as any type of employment contract or
obligation between the Company and an Executive Employee or
Participant.
SECTION 3. NONTRANSFERABILITY. Neither a Participant nor any beneficiary
of the Participant shall have any right to assign, transfer,
attach, or hypothecate any Award, potential Award, or right to
future payment of any Award or other benefit under this Plan.
Payment of any amount due or to become due under this Plan
shall not be subject to the claims of creditors of the
Participant or to execution by attachment or garnishment or by
any other legal or equitable proceeding.
SECTION 4. WITHHOLDING. The Company shall have the right to deduct from
any payment made under this Plan all amounts required by
federal, state, or local tax laws to be withheld and shall
apply to any payment made under this Plan all applicable
payroll taxes and assessments.
SECTION 5. CHANGE IN CAPITALIZATION. In the event of a reorganization,
merger, consolidation, or other transaction in which the
Company is not the surviving corporation, or upon the sale of
substantially all of the property and assets of the Company or
upon the dissolution or liquidation of the Company, this Plan
will terminate on the effective date of such transaction.
Participants shall be entitled to prompt payment of pro-rated
Awards for the Award Year during which the event occurs unless
this Plan continues in whole or in part or a successor plan is
substituted.
IN WITNESS WHEREOF, this instrument is executed as an act of
the Company effective as of May 1, 1998.
MANATRON, INC.
By /S/ PAUL R. SYLVESTER By /S/ GENE BLEDSOE
Paul R. Sylvester Gene Bledsoe, Member,
President, Chief Executive Officer, Compensation Committee
and Chief Financial Officer
By /S/ HARRY C. VORYS By /S/ STEPHEN C. WATERBURY
Harry C. Vorys, Member, Stephen C. Waterbury, Member
Compensation Committee Compensation Committee
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SECOND QUARTER 1999 FORM 10-Q OF MANATRON, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 988,771
<SECURITIES> 0
<RECEIVABLES> 6,515,813
<ALLOWANCES> 863,000
<INVENTORY> 388,908
<CURRENT-ASSETS> 11,802,381
<PP&E> 6,095,320
<DEPRECIATION> 4,963,091
<TOTAL-ASSETS> 16,517,912
<CURRENT-LIABILITIES> 10,468,898
<BONDS> 0
<COMMON> 5,584,799
0
0
<OTHER-SE> 194,537
<TOTAL-LIABILITY-AND-EQUITY> 5,779,336
<SALES> 17,303,277
<TOTAL-REVENUES> 17,303,277
<CGS> 11,488,856
<TOTAL-COSTS> 11,488,856
<OTHER-EXPENSES> 5,116,880
<LOSS-PROVISION> 215,665
<INTEREST-EXPENSE> 30,037
<INCOME-PRETAX> 477,290
<INCOME-TAX> 0
<INCOME-CONTINUING> 477,290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 477,290
<EPS-PRIMARY> .17
<EPS-DILUTED> .15
</TABLE>
